Banking System Liquidity Tightens
Liquidity in India’s banking system is tightening due to upcoming GST and advance tax payments. A recent Variable Rate Repo (VRR) auction saw heightened demand, with banks submitting bids of ₹62,877 crore against the RBI’s notified ₹25,000 crore, highlighting liquidity pressures. The RBI is addressing this by reducing the Cash Reserve Ratio (CRR) in two phases, releasing ₹1.16 lakh crore into the system. This measure aims to stabilize liquidity while supporting economic needs. The banking sector’s liquidity management remains critical amid tax outflows, capital flow volatility, and increased cash circulation.
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